Zenabis Global Inc. (TSX: ZENA) (“Zenabis” or the “Company“) today provided its monthly operational update for July, 2020.
Zenabis Atholville remains in steady state production, with July cultivation output 5% greater than design capacity.
The Company now expects that August international shipments of GPP cannabis to be greater than 1,000 kg, subject to export permit receipt. September GPP shipments are also expected to be greater than 1,000 kg, subject to export permit receipt. Zenabis anticipates ongoing GPP shipments of greater than 1,000 kg per month on an ongoing basis by the start of the fourth quarter of 2020.
The Company received two export permits for shipments to Australia in July and expects to complete its first shipment in August.
Kevin Coft, Interim Chief Executive Officer of Zenabis, stated, “Zenabis Atholville continues to perform well with respect to cultivation output, with July harvests exceeding design capacity by 5%. International demand for cannabis is extremely strong, as is demand for price-competitive formats and brands within the Canadian recreational market.”
Zenabis Atholville remains in steady-state production from a cultivation standpoint, with July cultivation output 5% greater than design capacity. There are no changes to Zenabis’ expectations with regards to the launch of additional cultivars from the Zenabis Atholville facility.
The Company is currently expanding hours of operation for extraction activities at Zenabis Atholville as a result of demand for the Company’s Cannabis 2.0 products, including its Namaste PAX Era and Re-Up 510 threaded vaporizer cartridges. In the interim, as extraction throughput increases at Zenabis Atholville, the Company has secured incremental supply of distillate from third parties. The Company anticipates no longer requiring third-party supply of distillate by the fourth quarter of 2020 and beyond.
Zenabis Langley cultivation remains in steady state for the summer months at this time. In conjunction with production from Zenabis Atholville, cultivation output remains sufficient to meet current market demand without further expansion of Zenabis Langley.
Zenabis Stellarton is currently operating as the Company’s centre of excellence for Cannabis 2.0 products, including beverages, products derived from trichome extraction, edibles, and hashish products. The facility is also completing pre-roll production and distribution of Namaste and Re-Up pre-rolls.
Business Development Update
Cannabis 2.0 Update
The Company is currently working to rapidly increase distillate production in order to meet the current level of consumer demand.
Additional Oil-derivative Concentrates
No change from the June operational update.
Trichome Concentrate Product Production
No change from the June operational update.
No change from the June operational update.
First processing and testing of edible products has taken place. Commercial production is expected to commence this quarter. The Company currently has listings for edible products (in all cases chocolates, gummies, or both) in eight provinces.
The first shipments of Re-Up 510 threaded vaporizer cartridges took place in July. The current product line includes two high-THC products and one CBD product, with these products currently listed in five provinces, and listings in an additional three provinces anticipated by the end of August. The Company is currently working to rapidly increase distillate production in order to meet the current level of consumer demand. In the interim, the Company has commenced purchases of distillate from third parties for the purpose of Re-Up 510 threaded vaporizer cartridges.
Recreational cannabis shipments continued to increase month over month in July as the Company has launched additional recreational cannabis SKUs and previously enacted price changes and format additions reached retail consumers. The Company commenced its first shipments of non-strain specific Re-Up Indica and Re-Up Sativa 28 g formats in July. Olen Vanderleeden, Senior Vice President of Commercial Operations, commented, “July provincial volumes were the highest in the history of Zenabis, indicative of strong consumer demand for competitively priced, high-quality cannabis products.”
Supply Agreements, Contract Cultivation Agreements, International Agreements, and Bulk Market Cannabis Sales
The following is a summary of the status of the various relations by contract or relationship type:
Contract or Arrangement Type
Number of contracts or counterparties, status and current or expected volume
Bulk – Current Pay – Canada
Two ongoing arrangements, with both currently shipping; volume of up to 200 kg per month.
Bulk – Current Pay – International
Two ongoing arrangements with counterparties in Israel, with anticipated combined volume of greater than 1,000 kg per month on an ongoing basis, and scheduled shipments ongoing. Achieving volumes of 1,000 kg per month or greater is subject to export permit receipt in any given month.
Packaged – Current Pay – International
One ongoing arrangement with a counterparty in Australia; Two export licenses for shipments to Australia received in July. First shipments are expected to occur in August subject to coordination of logistics in Australia given the impact of Australian COVID regulations on shipments.
Bulk – Current Pay – EU GMP
One executed contract for a minimum volume of 500 kg per year with shipments awaiting EU GMP certification of ZenPharm facility in Malta. The export permit for the first commercial shipment was submitted in July.
Joint Research – International
One research agreement with a counterparty in the United States. The export permit for the first research shipment was received in July.
Contract Cultivation – Canada
Two executed contracts for a potential volume of 200 kg per month, with one ongoing and one on hold.
Prepaid Supply – Canada
Two executed contracts with potential volume of more than 2,000 kg per month, with one operating in accordance with the contract, and one subject to dispute.
All international shipments and arrangements, with the exception of those noted as being shipped as EU GMP, are shipped under good production practices (“GPP”).
Zenabis is currently in various stages of discussions with potential counterparties for additional agreements for bulk, contract cultivation and other commercial agreements.
The Company currently expects the audit of ZenPharm to be completed by the Malta Medicines Authority in September.
Zenabis is a significant Canadian licensed cultivator of medical and recreational cannabis, and a propagator and cultivator of floral and vegetable products. Zenabis employs staff coast-to-coast, across facilities in Atholville, New Brunswick; Aldergrove, Pitt Meadows and Langley, British Columbia; and Stellarton, Nova Scotia. Zenabis currently has 111,200 kg of licensed cannabis cultivation space across four licensed facilities. Zenabis has 3.5 million square feet of total facility space dedicated to a mix of cannabis production and cultivation and its propagation and floral business.
Zenabis expects Zenabis Stellarton, as Zenabis’ centre of excellence for Cannabis 2.0 products, to join Zenabis Atholville and Zenabis Langley in steady state production by the end of 2020. The Zenabis brand name is used in the cannabis medical market, the Namaste, Blazery, and Re-Upbrand names are used in the cannabis adult-use recreational market.
Forward Looking Information
This news release contains statements that may constitute “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information may include, among others, statements regarding the future plans, costs, objectives or performance of Zenabis, or the assumptions underlying any of the foregoing. In this news release, words such as “may”, “would”, “could”, “will”, “likely”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate” and similar words and the negative form thereof are used to identify forward-looking statements. In this news release, forward-looking statements relate, among other things, to: through a combination of cultivation output from Zenabis Atholville and Zenabis Langley, Zenabis does not expect it will require any further expansion of cultivation capacity at this time; The Company now expects that August international shipments of non-GMP cannabis to be greater than 1,000 kg, subject to export permit receipt; September non-GMP shipments are also expected to be greater than 1,000 kg, subject to export permit receipt; Zenabis anticipates ongoing non-GMP shipments of greater than 1,000 kg per month by the start of the fourth quarter of 2020; In conjunction with production from Zenabis Atholville, cultivation output remains sufficient to meet current market demand without further expansion of Zenabis Langley; Commercial production [of edible products] is expected to commence this quarter; The Company currently expects the audit of ZenPharm to be completed by the Malta Medicines Authority in September; and the expected content of future operational updates. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. No assurance can be given that any events anticipated by the forward-looking information will transpire or occur. Forward-looking information is based on information available at the time and/or management’s good-faith belief with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond Zenabis’ control. These risks, uncertainties and assumptions include, but are not limited to, those described in the shelf prospectus dated April 9, 2019as supplemented by a prospectus supplement dated June 19, 2020 and the annual information form dated March 30, 2020, copies of which are available on SEDAR at www.sedar.com and could cause actual events or results to differ materially from those projected in any forward-looking statements. Furthermore, any forward-looking information with respect to available space for cannabis production is subject to the qualification that management of Zenabis may decide not to use all available space for cannabis production, and the assumptions that any construction or conversion would not be cost prohibitive, required permits will be obtained and the labour, materials and equipment necessary to complete such construction or conversion will be available. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements or information contained in this news release. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Zenabis does not intend, nor undertake any obligation, to update or revise any forward-looking information contained in this news release to reflect subsequent information, events or circumstances or otherwise, except if required by applicable laws
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